Tags: Enron | Fallout: | Bush | Focuses | Protecting | Pensions | Stockholders

Enron Fallout: Bush Focuses on Protecting Pensions, Stockholders

Thursday, 10 January 2002 12:00 AM

"One of the things we're deeply concerned about is that there has been a wave of bankruptcies that have caused many workers to lose their pensions," Bush said, "and that's deeply troubling me."

He said he has ordered secretaries of the Treasury, Commerce and Labor Departments to "come up with recommendations how to reform the system" so that people are not exposed to "losing their life savings."

He said Treasury officials along with the Federal Reserve Bank, the Securities and Exchange Commission and the Commodities Futures Trading Corp. were investigating whether there are adequate rules to ensure that corporations disclose their true financial condition to stockholders. The action, he said, is "to make sure that the American stockholder, or any stockholder, is protected.

Enron declared bankruptcy in December. It was the largest corporate collapse in U.S. history, coming after it disclosed that it would take a $1.2 billion reduction in shareholder equity. The company's stock tumbled from the mid-$90s in the spring of 2001 to a few cents when it declared bankruptcy.

Before the stock collapse, Enron executives sold millions of dollars of company stock, but under the company's rules, employees could not sell the company's stock in pension programs until after they had turned 50 years of age. Hundreds of workers lost a large part of their life savings.

Enron is a major Texas company, and its executives have been supporters of President Bush in all of his political races. Kenneth Lay, the chief executive officer, has been a friend of the president's father for years and raised more than $100,000 for George Bush's election. Bush has also been a beneficiary of Enron's political action committee, as have other Republicans, as well as Democrats.

Several senior officials including Karl Rove, the president's political adviser, and Vice President Dick Cheney had large amounts of Enron stock.

At the White House briefing Thursday by spokesman Ari Fleischer, a reporter suggested that former senator and current Attorney General John Ashcroft's PAC may have received $25,000 from Enron. Fleischer was questioned whether that would constitute conflict of interest in the Justice Department's criminal probe of the collapse.

"The president has full faith and confidence in the professional prosecutors of the Department of Justice, and in the attorney general, to do what is right in pursuing this investigation, which must be pursued, to get to the bottom of all the allegations of criminal wrongdoing by Enron," Fleischer said.

"The Department of Justice has conflict-of-interest rules, and if there is anything that the secretary, the attorney general is aware of that would trigger it, the president knows he will take appropriate action."

Cheney acknowledged through White House lawyers in a Jan. 3 letter to a House of Representatives' investigating committee that he had met privately with Lay on April 17, 2001, when he was forming President Bush's energy policy proposal, and on some five other occasions with other Enron executives.

At the time of the Lay meeting, Enron was mounting a high-profile campaign to avoid the imposition of federal price caps on wholesale energy sales in California. The day after the meeting with Lay, Cheney gave a telephone interview to the Los Angeles Times in which he said the Bush administration opposed price caps.

When the company began to collapse in late fall, its executives reached out to administration officials for a federal bailout, but it was refused. Cheney met with Enron officials on Oct. 10, shortly before it took a write-down of equity. Cheney said in a letter to the House that he did not discuss Enron's financial problems.

Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans also received calls in the autumn from Lay, Fleischer said, but the president wasn't informed about it.

"What was told to me this morning was Secretary O'Neill said that he had been contacted by Mr. Lay in the fall of last year, and Mr. Lay brought to the secretary's attention his concerns about whether or not Enron would be able to meet its obligations. And he expressed his concern about the experience that Long-Term Capital went through when Long-Term Capital went bankrupt," Fleischer said at a news briefing.

"Secretary O'Neill then contacted Under Secretary Fisher and asked him to evaluate whether the comparison was apt, and the Department of Treasury was advised that it was not apt, as a result of Secretary Fisher's review."

Fleischer said the president was told of the telephone calls Thursday morning.

At a meeting with reporters Thursday, President Bush said he had never discussed the financial problems of the company with Lay and the last time that he saw him was at fundraiser last spring for his mother, Barbara Bush, for her literacy campaign in Houston.

The Department of Justice is only one of numerous investigations now aimed at Enron. Four congressional committees are also scrutinizing the collapse, and it faces lawsuits from stockholders and pensioners who have lost millions.

Enron retained Bob Bennett, one of Washington's most prominent political lawyers, to handle its defense. Bennett said Wednesday that the company was conducting its own investigation of what happened.

There are three main areas of the sudden collapse that have raised questions:

Copyright 2002 by United Press International.

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One of the things we're deeply concerned about is that there has been a wave of bankruptcies that have caused many workers to lose their pensions, Bush said, and that's deeply troubling me. He said he has ordered secretaries of the Treasury, Commerce and Labor...
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Thursday, 10 January 2002 12:00 AM
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